Leaked documents reveal fraud in Major League Baseball

Montreal has known it all too well – a cash-strapped Major League Baseball (MLB) franchise forced to relocate due to poor revenues, poor results, and poor ownership. In 2002, former Montreal Expos (and current Florida Marlins) owner Jeffrey Loria sold the franchise to MLB after his demands for public funds to build a new stadium weren’t met – demands that were made even as Montreal had yet to complete payments for the Olympic Stadium, a debt finally settled in 2006. After selling the Expos to MLB, he proceeded to buy the Marlins while securing a zero-interest loan from MLB for the $38.5-million difference between the Expos’ sale price and the Marlins’ price tag. If this doesn’t sound right, it shouldn’t. According to Yahoo! Sports writer Jeff Passan, Loria’s net worth as an art dealer is in the hundreds of millions. Loria is hardly someone who should be reliant on public funding for his baseball franchises. Yet according to MLB financial documents recently obtained by deadspin.com, he is fresh off of misleading the local government to secure public funds, thus extorting the taxpayers of Miami-Dade County for a sum that will total $2.4 billion by 2049.

Loria and other owners have experienced huge returns from public funding in the form of new stadiums either built or proposed. Additionally, they have used creative accounting and falsified earnings reports to receive a larger cut of revenue-sharing from MLB. Arguably the most progressive program initiated in commissioner Bud Selig’s tenure, revenue-sharing allows teams without the fan base of the Red Sox or the Cubs to field a competitive lineup – the posterchild of the program being the 2008 American League Champion, the Tampa Bay Rays. Like anything, however, revenue-sharing is not without its flaws.

The current system dictates that each team pay 31 per cent of their local revenues into a fund, which is then split evenly among the 30 teams in the league. Additional measures include giving a substantial amount of national broadcast revenues to small-market teams. On paper, the goal is accomplished – for instance, the New York Yankees paid out $76 million in revenue-sharing in 2005, with small market teams each pulling in at least $30 million. The failure comes from the propensity of most near-billionaire owners to pocket the vast majority of league welfare instead of investing in their on-field product.

Compounding this grievous misuse of charity are the pleas of poverty from owners, citing an incapacity to foot a majority share of the price tag for new state-of-the-art ballparks. This places the financial burden of these new stadiums on multiple generations of taxpayers. For instance, the Expos – now called the Nationals – have relocated to Washington, D.C.; one city deemed fit by both lawmakers and baseball officials to support such an undertaking. The problem, however, is that Washington is a city with a relatively tiny tax base that is now forced to foot the bill for a $611-million stadium. When one considers that the Nationals are lucky to reach half-capacity when Stephen Strasburg isn’t pitching, it becomes clear that there are better uses for tax dollars as scarce as these.

While it is understandable for MLB and its small-market owners to seek new stadiums on the cheap, it is wholly inexcusable to deceive local governments in the interest of public funding to accomplish that goal. Why should the cost of such an excessive luxury rest with taxpayers simply to bolster the profits of an entertainment industry? Certainly there are ways for a multi-billion dollar corporation to finance new stadiums that don’t include cheating schools, police departments, and hospitals out of funding that is urgently needed.

As deplorable as MLB and its owners’ business practices have been, they have been enabled by their local governments. In his article on Yahoo! Sports, Passan puts the situation into perspective, noting that “come 2012, [the Marlins will] be free to reap their revenue-sharing, Central Fund, and ballpark profits while [Miami-Dade] county prays enough tourism-tax dollars pour in to help pay off the loans” – an almost impossible order for a county dependent on state funding in one of seven states to not impose income tax.

Almost as startling as the extent to which MLB has gone to secure public funds is the lack of outcry by the media over a situation that should transcend ongoing pennant races. While some of MLB’s print and broadcast media are owned by the league or the teams themselves, there has been an uncomfortable silence overall regarding the consequences of these transgressions. The status quo is unacceptable, yet it seems that nobody is holding MLB’s feet to the fire to alter their practices. Considering the league’s lucrative broadcasting deal with ESPN, the story is unlikely to resurface on SportsCenter any time soon.

Since it’s becoming increasingly clear that politicians at the state and county levels are simply not equipped to handle taxpayer money when a new baseball stadium is at stake, measures need to be taken to prevent future deceptions like these. These changes could include a percentage limit of government funds used to build stadiums, an outright ban on the use of government funds for stadiums, a stadium fund financed with revenue-sharing dollars for small-market owners, or a combination of these.

The league has suffered a black eye in light of the leaked documents, but their practices are unlikely to change. While it is the responsibility of representative government to allocate taxpayer funds judiciously, the exploitation of tax bases to aid a corporation like MLB in selling their product is arguably the ugliest untold story in sports. Accountability for their fraudulent behaviour isn’t being demanded by MLB’s media coverage as a whole. Will fans and local governments take a stand against the League for wringing every penny possible from their coffers, or will the national pastime continue its pillaging of the people who support it?

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